By Boston.com-Reuters, 4/25/2003

RECIFE, Brazil (Reuters) - Brazilian President Luiz Inacio Lula da Silva said he and his Venezuelan counterpart, Hugo Chavez, agreed Friday to create an ''integrated South American economic area'' by the end of 2003.

Hosting Venezuela's leader in his home state in the northeast of Brazil, Lula said it was ''urgent'' to reach a free trade deal between the Mercosur trade group and the Andean countries of Venezuela, Colombia, Peru, Bolivia and Ecuador.

''We agree on giving the highest priority to the integration of South America,'' Lula said after meeting Chavez. ''We are in full agreement about ... a free trade zone between the Andean Community and Mercosur.''

The statement by Brazil's new center-left president signaled his ambition to continue his predecessor's drive to unite South America's main trade groups before the creation of a Free Trade Area of the Americas (FTAA), including the United States and Canada.

Mercosur includes Brazil, Argentina, Uruguay and Paraguay, as well as associate members Chile and Bolivia. Brazil is South America's largest economy.

Brazil's former President, Fernando Henrique Cardoso, sought to unite the region with an eye to giving it greater clout in comparison with the United States in FTAA negotiations. FTAA would be the world's largest free trade area, running south from the Canadian Arctic to Patagonia in South America. Trade is expected to begin in 2006.

Lula said that FTAA talks needed to ''keep in mind the different levels of economic development of the hemisphere's countries and the grave social needs in many of them.''

Lula hosted U.S. Treasury Secretary John Snow this week, who hinted during his trip that Washington could address Brazil's long-held grievance that the U.S. is doing too little to get rid of subsidies Brazil says hinders its farm goods from reaching U.S. markets.

''In spite of many promises and declarations, markets in developed countries remain closed to many of our products, especially those that have clear comparative advantages,'' Lula said in reference to farm exports.

Despite Lula's ambition to strengthen Brazil's negotiating clout by working with other South American states, his agriculture minister said in Washington Friday that Brazil could consider bilateral trade talks with Washington if it gained greater access to U.S. markets.

<a href=www.sfgate.com>SFGate.com-AP HAROLD OLMOS, Associated Press Writer Friday, April 25, 2003
(04-25) 16:29 PDT RECIFE, Brazil (AP) --

Venezuelan President Hugo Chavez said Friday that foreign powers shouldn't meddle with Iraq's oil and that any interference would be a return to colonialism.

"Iraqi oil should be handled by the Iraqi people," Chavez said after arriving in this northeastern Brazilian city. "Otherwise it would be going back 200 years, and I don't want to think that the new century is beginning with colonialism."

Chavez and Brazilian President Luiz Inacio Lula da Silva discussed several joint business projects, including construction of a $2 billion oil refinery.

No agreement was formalized to build the refinery, but Chavez told reporters he wants to sign an agreement as soon as possible.

Although five Brazilian states are vying for the project, Chavez said he prefers Pernambuco state.

Recife, the capital of Pernambuco, was the home of Jose Inacio de Abreu e Lima, a 19th-century Brazilian independence soldier who fought against Spain along with Venezuela's liberator, Simon Bolivar -- who is Chavez's hero.

Chavez's visit to Brazil was the third since Silva took office on Jan. 1, but this was the first specifically to discuss business, not politics.

For years, Brazil was little more than a customer for Venezuelan oil. But the populist Chavez has pushed for closer ties with Silva, Brazil's first leftist president in 40 years.

Early this year, as Chavez faced an opposition strike demanding his resignation, Brazil played a key role creating a Group of Friends of Venezuela. The group -- which includes the United States, Mexico, Spain, Portugal and Chile -- works with the Organization of the American States to help the oil-rich nation resolve its domestic strife.

Weeks before the group was formed, Brazil sold Venezuela over half a million barrels of gasoline, just at the peak of a two-month oil strike that crippled Venezuela's economy. The strike eventually ended without reaching its goal of ousting Chavez.

The refinery is a long-standing economic development idea to meet the needs of Brazil's north and northeast, a vast poverty-stricken region with a population of 40 million -- nearly a fourth of Brazil's 170 million people and almost double Venezuela's 24 million.

It would also improve refining capacity for Venezuela and Brazil, Chavez said. Brazil exports crude oil, but must import gasoline because it lacks refining capacity.

"We want to refine oil in or as close to Venezuela as possible -- in the Caribbean, in the Andes or here in Brazil," he said. "We can refine all this oil here and sell gasoline not only in South America but also in the Caribbean and Africa."

The Brazilian government has not yet decided where to build the plant, which eventually would process up to 200,000 barrels of crude daily. At least five northeastern and northern states are interested.

At their meeting, Chavez and Silva discussed the situation in post-war Iraq. Silva, who opposed the war, said he is "committed to contributing for the United Nations to have again a key role in a lasting solution of this matter."